Cash funding for loan waiver scheme for farmers

New Delhi, March 14 (IANS) A Rs.600 billion ($15 billion) debt waiver package for farmers, announced in the annual budget, will be funded entirely in cash, with two-thirds disbursal in just 15 months, Finance Minister P. Chidambaram said here Friday. “We will complete two-thirds of the package in just 15 months,” Chidambaram told the Lok Sabha, adding the provisional estimates indicate that the package will finally involve Rs.602.216 billion.

“The package will be fully financed through payments in cash during a period of 36 months between July 2008 and June 2011,” he said. Eighty-four percent of the package will be set aside for some 30 million small and marginal farmers.

The package, announced during the course of India’s budget presented Feb 29, will be finalised by June 30 and the funding will conclude fully in three years thereafter, the finance minister said.

“I am very confident we can finance the burden of this order by regular budget exercise,” he said, adding the legroom was possible due to high economic growth and fiscal prudence during the regime of the United Progressive Alliance (UPA).

“I am happy to announce farmers’ accounts will be cleaned up by June 30.”

The finance minister said the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (Nabard) had been asked to give their assessment on the extent of debt and intended beneficiaries by March 14.

“I am happy and proud that in the third supplementary for this year itself, I have been able to keep aside Rs.10,000 crore (Rs.100 billion) to kick start the farmers’ debt relief fund.

“That we are able to establish the fund in year zero itself, and that too with a substantial contribution of Rs.10,000 crore is demonstration of the UPA government’s determination to ensure the debt waiver programme is fully financed.”

He also said the funding would see 55 percent being set aside for cooperative institutions, 35 percent for scheduled commercial banks and 10 for regional rural banks.

“We will have firm estimates once the complete data is available. Upon receiving the data, we shall immediately authorize an audit of a random sample of branches in order to verify the correctness of the data furnished,” he said.

“Given the potential for rapid growth of the economy, the burden in any single year will not be more than 0.25 percent of the gross domestic product (GDP),” he said adding, it will also be of that magnitude only in 2008-09.

“We should be able to finance the package in each year using tax revenues alone. If that is not sufficient, we can also tap non-tax revenues and non-debt capital receipts in that order. Even if that is not enough, there is enough leg room.”

He said he was disappointed some experts had not understood the significance of keeping the fiscal deficit at just 2.5 percent of GDP, well below the target of 3 percent, which, in turn, had opened up several possibilities.

He also assured there will be complete transparency and non-discretionary use of the scheme so as to address the distress of farmers in the best manner possible.

“I may also add that the final package must be affordable, non-discretionary and automatic, and simple and easy to implement at branch level by branch managers,” he said.

“Wherever one draws the line, there will be some people who will be at the edge requesting to be included. My intention is to include all deserving farmers and I shall do my best taking into account any compelling circumstance,” he said.

“In phasing out the package across institutions and over time, we have been and we will be mindful of the need to ensure that all institutions have sufficient liquidity to meet fresh credit demand.”